China Corporate Debt to Overtake U.S. Within Two Years, S&P Says

May 15 (Bloomberg) -- Chinese corporate borrowing will
probably exceed that of U.S. companies within the next two
years, according to Standard & Poor’s.

Non-financial institutions from the world’s second-largest
economy will need $18 trillion of debt during the five years
ending 2017, the ratings company said in a report yesterday.
That’s 34 percent of the $53 trillion in bonds and loans S&P
estimates will be sought globally and compares with $13 trillion
forecast for U.S. companies.

Chinese and Hong Kong borrowers sold $41.2 billion of U.S.
dollar-denominated bonds since December, the busiest start to a
year on record, according to data compiled by Bloomberg. Cnooc
Ltd., the nation’s biggest offshore energy explorer, raised $4
billion this month with the largest offering out of Asia in a
decade, as it looks to replace part of a loan used to acquire
Canada’s Nexen Inc.

“High levels of investment, primarily in manufacturing,
real estate, and infrastructure, have supported the country’s
strong economic growth rate, particularly over the past five
years - and credit is fueling this investment,” S&P said in the
report. “While China is now on a lower growth trajectory than
in the prior decade, the trajectory is still very high by global
standards.”

China’s economic expansion unexpectedly slowed to 7.7
percent last quarter from a year earlier, losing momentum from
the 7.9 percent expansion in the previous three months,
according to the statistics bureau.

Debt Piles

China’s risk of a growth correction is the highest among 32
economies surveyed because the nation’s investments are less
productive, S&P wrote in the report. The country’s outstanding
corporate debt will overtake that of the U.S. in 2014 if it
swells at 1.2 times the pace of nominal gross domestic product
growth, or in 2015 if the increase matches GDP, S&P said.

Companies across the Asia-Pacific region will need $27
trillion of debt in the five-year period, borrowers in the euro
zone and the U.K. will seek $10 trillion and companies in Latin
America will raise $1.4 trillion, according to the report. Banks
and bond investors will probably be able to accommodate the debt
demands, S&P said.

China will need more than $8 trillion for refinancing
during the five years, accounting for half of such needs in the
Asia-Pacific region, according to the estimates.

Borrowers from Hong Kong and China have sold seven times
more bonds to repay existing debt this year than in the first
five months of 2012, data compiled by Bloomberg show. Bright
Food Group Co., which has operations from dairy to wine, this
week issued $500 million of securities maturing May 2018,
according to data compiled by Bloomberg. The company will use
the funds to repay financing for its acquisition of British
cereal maker Weetabix Ltd., Moody’s Investors Service said in a
report on May 7.